The first question you need to answer is what to do with records that don't have a matching Department in your TBL_DEPARTMENT table. Can you ignore those records, or do you need to report them at some point?
In the Reference Table table of the Lookup Transformation Editor, you should select Use Results of a SQL query and enter "SELECT DEPARTMENT_Name FROM server2..TBL_DEPARTMENT." On the Columns tab, join the DEPARTMENT field of the Available Input Columns to the DEPARTMENT_NAME field of the Available Lookup Columns.
Click on the Configure Error Output button. Go to the Error column of the Lookup Output row. To ignore unmatched records, select Ignore Failure from the drop-down. To enable the ability to redirect the unmatched rows to another output, select Redirect Row.